tag:blogger.com,1999:blog-5908830827135060852.post4905414385514994415..comments2024-03-01T02:40:14.946-05:00Comments on Bond Economics: The Limitations Of Economic Theory In The Current EnvironmentBrian Romanchukhttp://www.blogger.com/profile/02699198289421951151noreply@blogger.comBlogger4125tag:blogger.com,1999:blog-5908830827135060852.post-49071691631692406382015-07-05T14:10:09.734-04:002015-07-05T14:10:09.734-04:00I think I agree with your logic here, but I,would ...I think I agree with your logic here, but I,would not focus on debt levels in phrasing it.<br /><br />The way the euro zone is constructed, there is an issue with countries having loose fiscal policies, but benefiting from the price level stability in other regions. (This is a Chartalist argument, but now the taxes that maintain the value of the currency are being paid by foreigners.) Those in favour of punishing Greece would argue that is exactly what has been happening. Although there is probably some limited support for that argument, I would argue that the EU response has been far disproportionate relative to the magnitude of this effect.Brian Romanchukhttps://www.blogger.com/profile/02699198289421951151noreply@blogger.comtag:blogger.com,1999:blog-5908830827135060852.post-48849249786804652972015-07-05T12:00:02.529-04:002015-07-05T12:00:02.529-04:00Yes, currency is a small part of the economic anal...Yes, currency is a small part of the economic analysis. The much bigger part is deposits and the increase in debt.<br /><br />MMT would opine that stimulus comes from increased money supply. Increased money supply comes from an increase in both private and public debt. Put this perspective into the euro context.<br /><br />The euro zone would like for borrowing to increase but would also like to keep the money supply increasing at a modest rate. Because the euro zone is composed of several national central banks but a unified currency, a major question becomes "Who will increase the money supply?". Will it be the private sector or will it be a nation(s)? <br /><br />Greece seems to have acted as if it was going to be the vehicle that increased the euro money supply. In the eyes of the euro officials, the more money supply that Greece created, the less that could be created in other euro countries. Greece was monopolizing the ability of the euro zone to create money, taking a disproportionate share of the economic advantage resulting from the creation of money. Said another way, Greece was usurping the authority of the euro managers with a resulting disproportionate advantage to Greece. <br /><br />If we agree with this line of MMT logic, then we can conclude that the real problem with Greece is not the debt incurred; the real problem is with the unbalanced Greek government budget. The amount of Greek debt is peripheral to the need for a balanced Greek government budget.Roger Sparkshttps://www.blogger.com/profile/01734503500078064208noreply@blogger.comtag:blogger.com,1999:blog-5908830827135060852.post-11606040789424954662015-07-05T10:13:15.319-04:002015-07-05T10:13:15.319-04:00I do not see currency as being particularly import...I do not see currency as being particularly important for most economic analysis. Most transactions are electronic, outside of small retail purchases and the underground economy. The situation in Greece now is fairly atypical, as people are effectively front running the potential for a new currency. This does not happen in sensibly managed economies.<br /><br />The "Y" marker exists, but it has no legal standing. Other than people who were paranoid in Northern Europe, nobody segregated bills. That has probably changed, but it is a little late. There's probably no data collected.<br /><br />Also, the minting operations were not run on a purely national basis (other than coins). Different countries would handle different note denominations, and so they had to be mixed. (I think Greece only was printing 10 or 20 euro notes.) Since the ECB wants to consider itself a transnational body, it did not care about the exact mix of minting.<br /><br />If Greece is cut off from the rest of the euro, the notes would have to be segregated. At that point, you might see data being collected.Brian Romanchukhttps://www.blogger.com/profile/02699198289421951151noreply@blogger.comtag:blogger.com,1999:blog-5908830827135060852.post-21635109329288703982015-07-05T09:26:55.107-04:002015-07-05T09:26:55.107-04:00Money supply is a vital component of current econo...Money supply is a vital component of current economic theory. Vincent Cate, in a post found at<br /><br />http://howfiatdies.blogspot.com/2015/06/euro-with-n-is-new-drachma.html.<br /><br />claims that a euro with Y (as the leading serial number letter on euro printed cash) can be considered the new drachma.<br /><br />I wrote the following comment: <i><br /><br />"I know as I write this comment THAT the Greek polls will close in about 4 hours and that a lot of cash has left Greek banks.<br /><br />What I do not know is if the cash recently disbursed in Greece ALL has a Y as the leading letter in the serial number.<br /><br />If the cash has a high percentage of other leading letters, then the fact that Greece is a very small economy is a leading factor in deciding how euro cash is serialized. <br /><br />On the other hand, if a large percent (or all) of the recently disbursed cash has the leading Y, then Greece debt is being traded in the form of cash. What if most of all euro cash (including cash in not-Greek nations) had a Y leading the serial number? Then Greed debt is being traded as cash money throughout the euro zone. <br /><br />I have no idea about how widely spread the Y serial number issues are distributed. It would be an interesting and revealing statistic. " </i><br /><br />I think that the Greek situation will provide some new clues to better economic theory. The distribution of Y serial numbers may be one data based pathway. Roger Sparkshttps://www.blogger.com/profile/01734503500078064208noreply@blogger.com